Natural catastrophe review for the first half of 2017

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18 July 2017
| Reinsurance

Press release

Natural catastrophe review for the first half of 2017: A series of powerful thunderstorms in the USA causes large losses

A series of hailstorms and tornadoes in the USA dominated the natural catastrophe statistics in the first half of 2017. A total of six severe, large-scale thunderstorms were recorded, each causing billions of dollars of losses. Worldwide nat cat losses from January to June, however, were below average.

An overview:

Overall losses came to US$ 41bn. The corresponding figure for
the first six months of 2016 was US$ 111bn; the average for the
last ten years US$ 102bn. Insured losses totalled US$ 19.5bn
(previous year: US$ 32bn; ten-year average US$ 29bn).

With less than half of the losses uninsured, the share of
insured losses was higher than usual. This is due to the major
thunderstorm losses in the USA, where insurance density is high.
The previous year, and the ten-year average, saw more than two
thirds of losses uninsured.

The highest overall losses in the first half-year were caused
by the floods in Peru in February and March with a figure of US$
3.1bn, US$ 380 million of which was insured. The costliest event
for insurers was a powerful thunderstorm in the USA in early May,
with insured losses of US$ 1.8bn and overall losses of US$
2.2bn.

In Europe, the overall losses of US$ 5bn
(€4.4bn) and insured losses of US$ 1.9bn
(€1.7bn) were also below the average (US$
13.4bn and 4.7bn). Just one year earlier, the headlines had been
dominated by a series of flash floods and river floods in Germany
and France. Nat cat losses in Asia/Pacific and Australia in H1 2017
totalled US$ 9.2bn, with US$ 2.1bn of these insured.

By the end of June 2017, Munich Re’s NatCatSERVICE database had
recorded 350 loss-relevant natural catastrophes, less than the
previous year’s figures (390) but more than
the ten-year average (310).

The high number of severe thunderstorms in the USA is presumed to
have been at least partially influenced by a natural climate
phenomenon, especially in the first quarter of 2017: the tropical
eastern Pacific off the northwest coast of South America was
exceptionally warm, a phenomenon that the Peruvian authorities have
dubbed “coastal El
Niño”, despite the
fact that it is not a full-blown El Niño
event. At the same time, it was significantly cooler than usual
further west. This difference in temperature can cause
teleconnection events that alter the atmospheric circulation over
the USA, increasing the likelihood of a large number of severe
thunderstorms with tornadoes and hail.

Munich Re Board member Torsten Jeworrek:
“The exceptional accumulation of severe
thunderstorms in the USA highlights just how important it is for
insurers to have in-depth knowledge of natural catastrophes and how
these are affected by climatic changes. This is true of both
natural climatic changes and those that are man-made. Insurers not
only help to overcome losses, they also improve our understanding
of what triggers them. This is a fundamental basis for preventing
future losses.”

Peter Höppe, Head of Munich
Re’s Geo Risks Research:
“The unusual atmospheric conditions in the
USA in the first half of 2017 provided the perfect conditions for
powerful supercell thunderstorms, which frequently bring major
hailstorms and tornadoes. The number of tornadoes observed in the
first quarter of 2017 was twice as high as the average for the last
ten years.”

Thunderstorms in the USA were responsible for three of the
world’s five costliest loss events in the
first half of the year, each causing economic losses of over US$
2bn. The total economic loss from these storms amounted to US$
18.5bn, of which US$ 13.5bn was insured.

Tony Kuczinski, President and CEO of Munich Reinsurance America,
Inc: “During the first half of 2017, we
continued to clearly see the impacts of tornado and hail events in
the United States in terms of damage to homes and business, which
ultimately result in direct and indirect losses to the economy.
Munich Re continues to participate in important research being
conducted to improve the way we build our homes and businesses,
with the ultimate goal to make them more resistant to the impacts
of weather related events. Preventative measures can reduce
vulnerability, and preparing for loss or damage can increase
resilience. These measures protect assets and save
lives.”

The coastal El Niño phenomenon was also
responsible for the costliest economic loss in the first half-year,
the February and March floods in Peru. High sea temperatures and
the subsequent increase in evaporation rates brought torrential
rainfall to Peru, triggering numerous landslides and river floods
close to the capital city of Lima and in rural areas in the north
of the country. Overall losses came to US$ 3.1bn. Due to the low
insurance density in Peru, the insured loss was only a tenth of
this figure, at just US$ 380m. “Emerging
countries in particular would benefit from higher insurance density
as it would allow them to recover more quickly from the financial
impact of natural disasters”, explained
Jeworrek.

Cyclone Debbie, which hit the Queensland coast of Australia in
late March, was the second-most expensive nat cat event of H1 2017,
with overall losses of US$ 2.7bn and insured losses of US$ 1.4bn.
Debbie made landfall on 28 March in the sparsely populated area
around Airlie Beach. It was a category four cyclone (second-highest
category) with wind speeds of up to 190 km/h (gusts up to 260
km/h). High winds and torrential rain damaged countless
buildings.

Hermann Pohlchristoph, Munich Re Board member responsible for
Asia-Pacific: “In terms of actual loss
amounts, Asia and Australia were not as badly hit by natural
disasters as they often are. The loss pattern of Cyclone Debbie in
Australia clearly shows that exposure in certain areas continues to
be high and that industry needs to address this issue through
improved structural measures and professional insurance
cover.”

Find more details and charts on the natural catastrophe figures
for the first half of 2017 in our Topics Online
magazine.

Munich Re stands for exceptional solution-based
expertise, consistent risk management, financial stability and
client proximity. This is how Munich Re creates value for clients,
shareholders and staff. In the financial year 2016, the Group
– which combines primary insurance and
reinsurance under one roof – achieved a
profit of €2.6bn. It operates in all lines
of insurance, with over 43,000 employees throughout the world. With
premium income of around €28bn from
reinsurance alone, it is one of the world’s
leading reinsurers. Especially when clients require solutions for
complex risks, Munich Re is a much sought-after risk carrier. Its
primary insurance operations are concentrated mainly in ERGO, one
of the leading insurance groups in Germany and Europe. ERGO is
represented in over 30 countries worldwide and offers a
comprehensive range of insurances, provision products and services.
In 2016, ERGO posted premium income of
€16.0bn. Munich Re’s
global investments (excluding insurance-related investments)
amounting to €219bn are managed by MEAG,
which also makes its competence available to private and
institutional investors outside the Group.

Disclaimer
This press release contains forward-looking statements that are
based on current assumptions and forecasts of the management of
Munich Re. Known and unknown risks, uncertainties and other factors
could lead to material differences between the forward-looking
statements given here and the actual development, in particular the
results, financial situation and performance of our Company. The
Company assumes no liability to update these forward-looking
statements or to conform them to future events or developments.

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